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Month Amount Owe at The Beginning of The Month (RM) Interest Owed For That Month 4% (RM) Amount Owed at The End of The Month (RM)
Month Amount Owe at The Beginning of The Month (RM) Interest Owed For That Month 4% (RM) Amount Owed at The End of The Month (RM)
Month Amount Owe at The Beginning of The Month (RM) Interest Owed For That Month 4% (RM) Amount Owed at The End of The Month (RM)
The company has a fund of RM340,500.00 in the bank account. To increase the fund, the
company decided to take a bank loan for additional amount of RM250,000.00. With interest
rate of 4% each month
Month Amount Owe at The Interest Owed for That Amount Owed at
Beginning of The Month 4% (RM) The End of The
Month (RM) Month (RM)
Borrowed RM250,000.00
N = 10 month
i = 4% per month
F = P(F/P, I n)
F = RM250,000.00 (1.4802)
F = RM 370,050.00
CASH FLOW DIAGRAM
RM
RM727640.00
250,000.00
I = 4% per month
1 2 3 4 5 6 7 8 9 10
RM370,050.00
The weighted average cost of capital represents the average cost of all our funds available in
the firm. The project required an investment around RM590,500.00. So, the 5 members of
company have to provided initial model of RM56,750.00. Another balance of RM 250,000.00
is loan from bank. Assume our company’s beta is 2.4, the cost of debt is 7% and the effective
income tax rate is 0.35.
λ = 250000/(590500 )=0.42
ἰb = 0.07
ea = RF+βS(RM-RF)
=0.02+2.4(0.08)
=0.212
t = 0.35
= 0.42(1-0.35)(0.07)+(1-0.3)(0.212)
= 0.168